Research Article

Hedging Longevity Risk: The Role of Longevity Bonds and Mortality Derivatives

Halimah Sani Sambo1*, Ahmed Yabagi Muhammed2, Abdulmalik Abubakar Yusuf3, Yusuf Abdulrahim Otori4
1 Ahmadu Bello University
2 Ahmadu Bello University, Zaria
3 Ahmadu Bello University Zaria
4 Department of Actuarial Science and Insurance Faculty of Management Science Ahmadu Bello University
* Corresponding author: halimahssambo247@gmail.com
Published: Feb, 2026
DOI: 10.67203/jarmf.2026.h9edb6ak
Pages: 80-90

Abstract

This study explores the potential of longevity bonds and mortality derivatives in hedging longevity risk within Nigeria's pension and insurance sectors. As life expectancy in Nigeria gradually increases, the financial risk of extended longevity poses a significant challenge to pension schemes and insurers, potentially undermining their long-term solvency. The study employs time series econometric methods to examine key indicators such as insured life reserves, pension fund liabilities, and life expectancy trends. Data were gathered from the annual financial reports published by PenCom, the CBN, and other relevant regulatory bodies spanning from 2005-2023. The results indicate that while longevity-linked financial instruments are currently absent in the Nigerian market, their introduction could provide an effective solution to mitigate the financial risks associated with longer lifespans. The study highlights the need for regulatory reforms, market development, and capacity-building efforts to enable the successful adoption of longevity bonds and mortality derivatives. The findings underscore the importance of proactive policy interventions to ensure the sustainability of pension funds and insurance systems in the face of Nigeria's evolving demographic profile

Keywords

Longevity Risk Longevity Bonds Mortality Derivatives Pension Fund Nigeria Financial Market

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How to Cite

Sambo, H. S., Muhammed, A. Y., Yusuf, A. A., & Otori, Y. A. (2026). Hedging Longevity Risk: The Role of Longevity Bonds and Mortality Derivatives. Journal of Actuarial, Risk Management and Finance, 1(1), 80-90. https://doi.org/10.67203/jarmf.2026.h9edb6ak

H. S. Sambo, A. Y. Muhammed, A. A. Yusuf, and Y. A. Otori, "Hedging Longevity Risk: The Role of Longevity Bonds and Mortality Derivatives," Journal of Actuarial, Risk Management and Finance, vol. 1, no. 1, pp. 80-90, February 2026. doi: 10.67203/jarmf.2026.h9edb6ak

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